Skip to main content
Sister Publication Links
  • Sustainable Plastics
  • Rubber News
Subscribe
  • Sign Up Free
  • Login
  • Subscribe
  • News
    • Processor News
    • Suppliers
    • More News
    • Digital Edition
    • End Markets
    • Special Reports
    • Newsletters
    • Videos
    • Injection Molding
    • Blow Molding
    • Film & Sheet
    • Pipe/Profile/Tubing
    • Rotomolding
    • Thermoforming
    • Recycling
    • Machinery
    • Materials
    • Molds/Tooling
    • Product news
    • Design
    • K Show
    • Mergers & Acquisitions
    • Sustainability
    • Public Policy
    • Material Insights Videos
    • Numbers that Matter
    • Automotive
    • Packaging
    • Medical
    • Consumer Products
    • Construction
    • Processor of the Year
    • Best Places to Work
      • 2023 winners
    • Women Breaking the Mold
    • Rising Stars
    • Diversity
    • Most Interesting Social Media Accounts in Plastics
  • Opinion
    • The Plastics Blog
    • Kickstart
    • One Good Resin
    • Pellets and Politics
    • All Things Data
    • Viewpoint
    • From Pillar to Post
    • Perspective
    • Mailbag
    • Fake Plastic Trees
  • Shop Floor
    • Blending
    • Compounding
    • Drying
    • Injection Molding
    • Purging
    • Robotics
    • Size Reduction
    • Structural Foam
    • Tooling
    • Training
  • Events
    • K Show Livestream
    • Plastics News Events
    • Industry Events
    • Injection Molding & Design Expo
    • Livestreams/Webinars
    • Editorial Livestreams
    • Ask the Expert
    • Plastics News Events Library
    • Processor of the Year submissions
    • Plastics News Executive Forum
    • Injection Molding & Design Expo
    • Plastics News Caps & Closures
    • Women Breaking the Mold Networking Forum
    • Plastics in Automotive
    • Bioplastics Live
    • PN Live: Mergers and Acquisitions
    • Polymer Points Live
    • Numbers that Matter Live
    • Plastics in Politics Live
    • Sustainable Plastics Live
    • Plastics Caps & Closures Library
    • Plastics in Healthcare Library
    • Women Breaking the Mold Networking Forum Library
  • Rankings & Data
    • Injection Molders
    • Blow Molders
    • Film Sheet
    • Thermoformers
    • Pipe Profile Tubing
    • Rotomolders
    • Mold/Toolmakers
    • LSR Processors
    • Recyclers
    • Compounders - List
    • Association - List
    • Plastic Lumber - List
    • All
  • Directory
  • Resin Prices
    • Resin Prices Overview
    • Commodity Thermoplastics
    • High Temperature Thermoplastics
    • Engineering Thermoplastics
    • Recycled Plastics
    • Thermosets
  • Custom
    • Sponsored Content
    • LS Mtron Sponsored Content
    • Conair Sponsored Content
    • KraussMaffei Sponsored Content
    • ENGEL Sponsored Content
    • White Papers
    • Classifieds
    • Place an Ad
    • Sign up for Early Classified
MENU
Breadcrumb
  1. Home
  2. News
March 26, 2019 02:00 AM

On the alert, but no 'ominous signs of recession'

Bill Wood
Economics Editor
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Wikipedia
    The Federal Reserve office in Washington.

    Most of the important U.S. economic data for the month of March will not be available for a few more weeks, but we have enough to know that the pace of growth in the U.S. economy slowed noticeably in the first quarter of this year. In fact, several early analysts' estimates indicate the economy has expanded by less than 1 percent so far in 2019.

    The last time real quarterly GDP growth was less than 1 percent was the fourth quarter of 2015. After that quarter, the pace of growth proceeded to accelerate steadily for the next three years. But since this is now the longest period of economic expansion any of us has ever experienced, it is understandable if a quarter of slow economic growth makes people feel anxious that we are close to the next period of recession.

    One of the indicators I always use to monitor the health of the U.S. economy is the Fed's industrial production index measuring output of plastics products. If you look closely at the graph, you can see that the slope in the trend for the U.S. output of plastics products was less steep in 2015 than it had been in 2014, but it unquestionably stayed positive. At that time, I was not particularly anxious about the below-average rate of expansion in the overall economy in the fourth quarter of that year. Some volatility in the data is to be expected, and the clear upward momentum in the plastics data was reassuring.

    This past year, however, the trend in plastics production was more worrisome. As a result, I am presently paying much closer attention to the trend in the overall economic data. The best way I can describe my current mindset is that I am alert but not yet alarmed.

    The graph shows that production of plastics products declined in the first half of 2018 before it started to recover in the second half of last year. The amount of decline in the data was not severe, but it was more than we have seen for a while. I take some comfort in the fact that despite the decline for part of the year, the total annual output of plastics products eked out a 0.2 percent gain in 2018 when compared with the previous year.

    Jessica Jordan

    Now let me state again that some volatility in the data, even in periods of recovery, is to be expected. The graph clearly shows two other periods during the past 10 years in which the plastics industry data declined for a few months and then jumped back to the upside. The U.S. economy and the market for plastics products are just too big and dynamic to ever become perfectly synchronized.

    In hindsight, it is easy to distinguish the start of a major downtrend from a brief period of consolidation. But it is difficult to know exactly what to expect when you are living through a down period in real time. And you don't have to be a statistician to know that when the growth rates of both the overall economy and total plastics production cycle down under 1 percent, the probability of a pending recession increases.

    Nevertheless, I believe the monthly plastics data will soon revert to the uptrend that has prevailed since 2009, and the annual growth rate for the total plastics industry this year will be in the range of 2-2.5 percent. And this hiccup in the first quarter notwithstanding, my forecast for real GDP growth this year still calls for a gain of 2 percent in 2019.

    The main reason for my continued optimism is that I believe the recent deceleration in the GDP data was primarily due to two or three short-term trends and one-time events that negatively affected U.S. economic activity but are now behind us. The most important of these was a short-term rise in interest rates in 2018. Interest rates rose appreciably in the second half of last year, and they hit a peak in November. This caused a sharp decline in the stock market for most of December.

    This decline in the stock market coincided with the shutdown of the federal government and rising trade tensions with most of our major trading partners, most notably China. The combination of these events had a chilling effect on the U.S. economy over the winter months. But except for the ongoing uncertainty about trade with China, the effects of the other events are fading.

    The Fed has stopped raising interest rates for the time being and mortgage rates are the lowest they have been in more than a year. The stock market has recovered all of what it lost last December and is now within about 4 percent of its all-time high. And most, importantly for readers of this magazine, the recent trend in plastics output has been higher.

    Naturally, I would like to see all these trends continue higher. But even if they go sideways for a few months before turning upward, I do not see any ominous signs of recession for another year or two. There is just too much momentum in the underlying economic fundamentals.

    The gains in the labor market decelerated in recent months, but job growth remains positive. Wage growth is accelerating, gasoline prices are low, and the Fed is in no hurry to raise interest rates. In addition to the strong fundamentals, household incomes will get a boost from tax refunds. There was some concern a few weeks ago that tax refunds were well below last year's levels, but after a sluggish start due to the government shutdown, tax refunds are now back to the same level as last year.

    RECOMMENDED FOR YOU
    Treaty talks end with plans for a draft agreement, but hurdles remain
    Letter
    to the
    Editor

    Do you have an opinion about this story? Do you have some thoughts you'd like to share with our readers? Plastics News would love to hear from you. Email your letter to Editor at [email protected]

    Most Popular
    1
    PVC compounder Manner launches $54M expansion in Illinois
    2
    Debate exposes divisions in plastics treaty talks
    3
    Treaty talks end with plans for a draft agreement, but hurdles remain
    4
    India's Vasantha invests $7M to open mold making support firm in Ohio
    5
    Graham Packaging wins validation for GHG emissions reduction
    SIGN UP FOR OUR FREE NEWSLETTERS
    EMAIL ADDRESS

    Please enter a valid email address.

    Please enter your email address.

    Please verify captcha.

    Please select at least one newsletter to subscribe.

    Get our newsletters

    Staying current is easy with Plastics News delivered straight to your inbox, free of charge.

    Subscribe today

    Subscribe to Plastics News

    Subscribe now
    Connect with Us
    • LinkedIn
    • Facebook
    • Twitter
    • Instagram

    Plastics News covers the business of the global plastics industry. We report news, gather data and deliver timely information that provides our readers with a competitive advantage.

    Contact Us

    1155 Gratiot Avenue
    Detroit MI 48207-2997

    Customer Service:
    877-320-1723

    Resources
    • About
    • Staff
    • Editorial Calendar
    • Media Kit
    • Data Store
    • Digital Edition
    • Custom Content
    • People
    • Contact
    • Careers
    • Sitemap
    Related Crain Publications
    • Sustainable Plastics
    • Rubber News
    • Tire Business
    • Urethanes Technology
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • News
      • Processor News
        • Injection Molding
        • Blow Molding
        • Film & Sheet
        • Pipe/Profile/Tubing
        • Rotomolding
        • Thermoforming
        • Recycling
      • Suppliers
        • Machinery
        • Materials
        • Molds/Tooling
        • Product news
        • Design
      • More News
        • K Show
        • Mergers & Acquisitions
        • Sustainability
        • Public Policy
        • Material Insights Videos
        • Numbers that Matter
      • Digital Edition
      • End Markets
        • Automotive
        • Packaging
        • Medical
        • Consumer Products
        • Construction
      • Special Reports
        • Processor of the Year
        • Best Places to Work
          • 2023 winners
        • Women Breaking the Mold
        • Rising Stars
        • Diversity
        • Most Interesting Social Media Accounts in Plastics
      • Newsletters
      • Videos
    • Opinion
      • The Plastics Blog
      • Kickstart
      • One Good Resin
      • Pellets and Politics
      • All Things Data
      • Viewpoint
      • From Pillar to Post
      • Perspective
      • Mailbag
      • Fake Plastic Trees
    • Shop Floor
      • Blending
      • Compounding
      • Drying
      • Injection Molding
      • Purging
      • Robotics
      • Size Reduction
      • Structural Foam
      • Tooling
      • Training
    • Events
      • K Show Livestream
      • Plastics News Events
        • Plastics News Executive Forum
        • Injection Molding & Design Expo
        • Plastics News Caps & Closures
        • Women Breaking the Mold Networking Forum
        • Plastics in Automotive
      • Industry Events
      • Injection Molding & Design Expo
      • Livestreams/Webinars
        • Bioplastics Live
        • PN Live: Mergers and Acquisitions
      • Editorial Livestreams
        • Polymer Points Live
        • Numbers that Matter Live
        • Plastics in Politics Live
        • Sustainable Plastics Live
      • Ask the Expert
      • Plastics News Events Library
        • Plastics Caps & Closures Library
        • Plastics in Healthcare Library
        • Women Breaking the Mold Networking Forum Library
      • Processor of the Year submissions
    • Rankings & Data
      • Injection Molders
      • Blow Molders
      • Film Sheet
      • Thermoformers
      • Pipe Profile Tubing
      • Rotomolders
      • Mold/Toolmakers
      • LSR Processors
      • Recyclers
      • Compounders - List
      • Association - List
      • Plastic Lumber - List
      • All
    • Directory
    • Resin Prices
      • Resin Prices Overview
      • Commodity Thermoplastics
      • High Temperature Thermoplastics
      • Engineering Thermoplastics
      • Recycled Plastics
      • Thermosets
    • Custom
      • Sponsored Content
      • LS Mtron Sponsored Content
      • Conair Sponsored Content
      • KraussMaffei Sponsored Content
      • ENGEL Sponsored Content
      • White Papers
      • Classifieds
        • Place an Ad
        • Sign up for Early Classified